The primacy of factors of production, such as labour and capital, over Total Factor Productivity (TFP) in stimulating economic growth, has long been a contentious subject in discussions on the underlying causes of economic growth. While the roles of labour and capital have been exhaustively explored, TFP still has room for further exploration, more specifically in sub-Saharan Africa (SSA). This study empirically examines the link between institutions and TFP in SSA, while controlling for other frequently explored variables, for example, research and development, human capital, infrastructure and financial development. The estimations provided in the study are based on a panel of 26 sub-Saharan African countries over the period 1990–2011. We find that, while some of these factors affect TFP in the long-run, there is a consistent relationship with institutions as well. We also find that market-based institutions play a more prominent role than the more frequently explored political institutions.
Institutions and Other Determinants of Total Factor Productivity in Sub-Saharan Africa
Working paper 714
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